The 10-year US Treasury yield trims Wednesdays losses and approaches the 2.80% threshold.
Gold Price could be on the way to a test of the 38.2% and 61.8% ratios near $1,950 and $1,930.
Gold price has been pressured at the end of the week and the bears are moving in at a critical area of resistance. The price has rallied for six days in a row but the bulls could be throwing in the towel at this juncture. At the time of writing, the gold price is trading at $1,972.470 and has been in a range of between $1,960.60 and $1,980.43 overnight.
In Asia, it is sticking to a range of between $1,97.46 and $1,973.50 so far. The US dollar has been stronger, printing fresh cycle highs in the DXY in the aftermath of the European Central Bank. Additionally, New York Fed President John Williams said on Thursday that the US Federal Reserve should reasonably consider raising interest rates by a half percentage point at its next meeting in May. This was taken as a hawkish hint for the money markets given that the more dovish the policymakers are starting to fall into line with the hawks
At today's meeting, the ECB reconfirmed a decision taken five weeks ago, in a broadly unchanged decision statement. ''That means that APP purchases will be conducted at a pace of EUR40bn/EUR30bn/EUR20bn in April/May/June, respectively, and net purchases to end in Q3, without a pre-specified purchase level for Q3,'' analysts at Danske Bank said.
''Christine Lagarde conveyed a message of not being in a rush to tighten policies as the economic activity (which is set to become weaker amid high uncertainty) outweighs the concerns about the outlook for extended high inflation, even though Lagarde seemed concerned about medium-term inflation expectations in particular surveys,'' the analysts at Danske Bank went on to explain. ''Therefore, we are slightly surprised about the messages sent during the press conference in light of its primary mandate.''
Consequently, the euro plunged to a two-year low against the greenback following the comments. The dollar index (DXY) rose to a fresh cycle high of 100.761 with the euro falling to a low of 1.0757. The US benchmark 10-year yield has scored highs of 2.833%, currently 4.55% higher on the day following two days of declines. The flows have dented the precious metal.
Meanwhile, Russo-Ukraine headlines dominate news flows, as Finland and Sweden's eye joining NATO. The Russian Deputy Chairman of the Security Council, Medvedev, said that if both countries join NATO, it would not make any difference for Russia and emphasized that there could be no more talk of a nuclear-free Baltic, as the “balance must be restored.” Additionally, Russian President Putin has again threatened NATO with his nuclear arsenal, saying he will deploy those weapons in and around the Baltic.
Meanwhile, a raft of US economic data crossed wires. Retail sales in the US rose 0.5% m/m in March, after a revised 0.8% in February, though helped by elevated gasoline prices. Also, retail sales stripping autos and gasoline increased 0.2% last month, higher than the 0.1% fall in February. At the same time, the Department of Labour unveiled the Initial Jobless Claims for the week ending on April 9, which jumped to 185K, more than the 171K estimated, data showed on Thursday.
Later in the US session, the University of Michigan Consumer Sentiment surprised market players, jumping to a three-month high, despite high inflationary pressures. The index rose to 65.7 from 59.4 in March and beat the 59 estimations. Consumers expect that inflation will increase to 5.4% over the next year, and their forecasts for the next five to 10 years will diminish to 3%.
Also read: Gold Price Forecast: XAU/USD remains on track to reclaim $2,000 – Confluence Detector
Fed officials have opened the door for 50-bps rate hikes at its May meeting, while STIRs show a 94% chance of a 0.50% lift to the Federal Funds Rate (FFR). The bets were reaffirmed by Wednesday's release of the US Producer Price Index, which indicated that there are pipeline costs that could put upward pressure on the already high inflation. Adding to this, Fed Governor Christopher Waller said that data supports 50 bps increases, and he prefers to front-load aggressive hikes at the May meeting and possibly more in June and July. He stated that he wants to get above neutral by the latter half of this year.
The downside, however, remains cushioned amid a further US dollar pullback from its highest level since May 2020, which tends to benefit the dollar-denominated commodity. Apart from this, geopolitics, with the most recent updates on the Russo-Ukraine war suggesting that peace remains farther than expected, could further drive haven flows towards gold. Russia's Deputy Foreign Minister said on Wednesday that they will view US and NATO vehicles transporting weapons on Ukrainian territory as legitimate military targets. This comes after Putin's remarks on Tuesday, saying that peace talks with Ukraine had hit a dead end.
Also read: Russia will view US and NATO vehicles transporting weapons on Ukrainian territory as a legitimate target
The incoming geopolitical headlines have dashed hopes for any diplomatic solution to end the war in Ukraine. Moreover, concerns about the potential economic fallout from the Ukraine crisis, along with inflation fears, should continue to boost gold's appeal as a hedge against rising prices. The fundamental backdrop seems tilted firmly in favour of bullish traders, though the lack of follow-through buying warrants some caution before positioning for any further gains.
Meanwhile, analysts at TD Securities explained the gold price is where it is as the markets ''continue to perceive the US central bank as being behind the curve, with strengthening price action highlighting the large gap between the current policy setting and the neutral rate.''
''From a positioning lens,'' they said, ''Shanghai traders continue to pile into gold in the aftermath of the ongoing rally catalyzed by a super-sized inflation print, but comex shorts have largely been wiped out and ETF inflows have slowed as the fear trade subsides.''
''In turn,'' the analysts added, ''while the Fed is signalling its intent to reach neutrality by year-end and to start an aggressive QT regime, outflows from gold markets have been scarce as participants are happy to retain some optionality against the Fed's stated plan amid growth concerns. This is particularly the case as stock-bond correlations are threatened by the higher inflation regime, leaving the yellow metal as a more potent diversifier. ''
Gold Price Forecast (XAUUSD): Technical outlook
The price of gold is trying to break out to the upside but a stubbornly strong US dollar prevails amid a dovish ECB and further hawkish rhetoric from Fed speakers given their ongoing concerns about US inflation.
Therefore, the $1,950s or even the $1,930s could come under pressure again as these correlate with a 38.2% Fibo and 61.8% golden ratio retracement respectively. If this area were to give out, the near-term prospects of a move higher would be severely diminished.
